Nigeria Accounted For 23% Of $6.5bn Raised By African Techs In 2022- Report
Despite the drastic pullback in global venture capital funding, a new report by Partech Africa, dedicated to technology startups in Africa says total funding invested into tech startups on the continent’s tech ecosystem reached $6.5bn.
This represented an increase of 8% over the 2021 level, spread across 764 deals – compared to the previous 724 rounds last year, outpacing all other markets globally.
Debt funding doubled in volume to $1.5bn, accounting for nearly a quarter of the total funding, the report noted, while fintech maintained the lead, attracting 39% of total equity volume, with Nigeria retaining the top spot with 23%.
Overall, according to the report, Nigeria, South Africa, Egypt and Kenya remain the top investment destinations on the continent with a share of total volume staying relatively steady at 72%.
Specifically, Nigeria attracted $1.2bn in capital, an amount that however declined bt 36% from 2021; while South Africa, Egypt, and Kenya each attracted over $0.7bn in funding, with Ghana completing the top five with just over $0.2bn.
In all, 28 countries attracted equity funding in 2022, 13 of them in Francophone Africa.
Partech Africa’s annual report on Africa Tech Venture Capital, which aims to provide a practical picture of the ecosystem, consisting of disclosed and confidential deals, saw debt funding reaching $1.55bn through 71 deals, a 65% YoY growth, while equity rounds showed a slight decline, as 653 African tech startups raised $4.9bn, down by 6% in 693 equity rounds, a 2% YoY growth.
Focusing on the equity funding, the report revealed the ecosystem was still accelerating during Q1 and Q2 of 2022 compared to 2021, with the YoY comparison showing Q1 and Q2 at 127% YoY, and 83% YoY, respectively.
However, the global VC slowdown stifled growth in activity in Q3, dropping by 65% YoY and Q4’s 35% YoY, just as fundraising activities in 2022 remained flat across all stages. At $1.4m, Seed+ ticket sizes averaged higher in 2022 up by 12% YoY, while Series A remained the same at $8.5m.
Later stages reverted to 2019 levels, as Series B and Growth round sizes dropped by 23% and 50% YoY, respectively, just as 2022 witnessed a significant reduction in the number of megadeals defined as those attracting over $100m, with only seven deals compared to 14 in 2021.
Speaking on the launch of the annual report, Tidjane Deme, General Partner at Partech, described 2022 as “a particularly challenging year for the venture ecosystem worldwide, as venture and growth investors scaled back their investment by a third.
“However, by comparison, our report revealed the African tech ecosystem showed great resilience, as more investors have doubled their commitment to the continent by investing in local teams and funds dedicated to the market, which is proving to be the best way forward.”
In the light of the market downturn, the report’s findings also revealed that Fintech, which has historically attracted sizable investments, was the most impacted by the slowdown in the number of large rounds. However, fintech remains the most funded sector in Africa, and this across all sources of capital, with 39% of the total equity volume at $1.9bn, and 45% of the total debt volume $691m.
Other sectors have experienced substantial growth and gained a meaningful share of the equity funding activity this year, most notably Cleantech, which made a big comeback with 18% of total equity funding at $863m, up by 347% YoY, as well as 39% of the total debt funding at $605m.
A further look at the report showed that female-founded startups raised 22% of all equity rounds in 2022, up 2 percentage points from 20% in 2021, besides also contributing $644m, or 13% of the total equity funding, down 3 percentage points from 16% in 2021.
Outside of the top four countries, Ghana, $202m; Algeria, $150m; Tunisia, $117m; and Senegal, $105m were the only other countries that broke the $100m funding mark, while despite a slowdown in the growth rate of equity investors, Africa’s tech ecosystem attracted 1,149 unique investors for the first time a 29% YoY improvement in 2021. African tech, the report added, has seen more investors committed, with 89 participating in 5 or more deals compared to 65 investors in 2021, even as the number of debt investors active on the continent is growing 2.5x YoY, with a good mix of local debt institutions, international lenders with emerging market vehicles and Development Finance Institutions.
Cyril Collon, General Partner at Partech, noted that “much of our methodology has remained the same over the years, and we, therefore, can provide a snapshot of how the African continent has evolved over the years. Nigerian and the fintech vertical have remained at the top spot; however, in an environment where equity funding is more challenging, debt has proved to be a solid alternative source of African tech startups in 2022, which signals a maturity within each sector.”